Examining the dynamic relationship between spot and future prices of agricultural commodities
This study examines the dynamic relationship between spot and futures prices of agricultural commodities. We first briefly discuss what the non-arbitrage and asset pricing theory has to say about the relationship between spot and futures markets. Next, using recent price data for corn, wheat, and so...
| Autores principales: | , |
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| Formato: | Artículo preliminar |
| Lenguaje: | Inglés |
| Publicado: |
International Food Policy Research Institute
2010
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| Materias: | |
| Acceso en línea: | https://hdl.handle.net/10568/154364 |
| _version_ | 1855523238171377664 |
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| author | Hernandez, Manuel A. Torero, Máximo |
| author_browse | Hernandez, Manuel A. Torero, Máximo |
| author_facet | Hernandez, Manuel A. Torero, Máximo |
| author_sort | Hernandez, Manuel A. |
| collection | Repository of Agricultural Research Outputs (CGSpace) |
| description | This study examines the dynamic relationship between spot and futures prices of agricultural commodities. We first briefly discuss what the non-arbitrage and asset pricing theory has to say about the relationship between spot and futures markets. Next, using recent price data for corn, wheat, and soybeans, we perform Granger causality tests to empirically uncover the direction of information flows between spot and futures prices. Linear as well as nonlinear (nonparametric) causality tests are conducted on both spot and futures returns and their volatility. The results indicate that spot prices are generally discovered in futures markets. In particular, we find that changes in futures prices lead changes in spot prices more often than the reverse. These findings also contribute to the debate on alternative instruments to address excessive volatility in grain markets. Our results support, for example, the viability of implementing a global virtual reserve, recently proposed by von Braun and Torero (2008, 2009), to prevent disproportionate spikes in grain spot prices through signals and, if necessary, market assessment in the exchange of futures. |
| format | Artículo preliminar |
| id | CGSpace154364 |
| institution | CGIAR Consortium |
| language | Inglés |
| publishDate | 2010 |
| publishDateRange | 2010 |
| publishDateSort | 2010 |
| publisher | International Food Policy Research Institute |
| publisherStr | International Food Policy Research Institute |
| record_format | dspace |
| spelling | CGSpace1543642025-11-06T06:00:52Z Examining the dynamic relationship between spot and future prices of agricultural commodities Hernandez, Manuel A. Torero, Máximo agricultural marketing prices futures trading This study examines the dynamic relationship between spot and futures prices of agricultural commodities. We first briefly discuss what the non-arbitrage and asset pricing theory has to say about the relationship between spot and futures markets. Next, using recent price data for corn, wheat, and soybeans, we perform Granger causality tests to empirically uncover the direction of information flows between spot and futures prices. Linear as well as nonlinear (nonparametric) causality tests are conducted on both spot and futures returns and their volatility. The results indicate that spot prices are generally discovered in futures markets. In particular, we find that changes in futures prices lead changes in spot prices more often than the reverse. These findings also contribute to the debate on alternative instruments to address excessive volatility in grain markets. Our results support, for example, the viability of implementing a global virtual reserve, recently proposed by von Braun and Torero (2008, 2009), to prevent disproportionate spikes in grain spot prices through signals and, if necessary, market assessment in the exchange of futures. 2010 2024-10-01T14:01:05Z 2024-10-01T14:01:05Z Working Paper https://hdl.handle.net/10568/154364 en Open Access application/pdf International Food Policy Research Institute Hernandez, Manuel A.; Torero, Máximo. 2010. Examining the dynamic relationship between spot and future prices of agricultural commodities. IFPRI Discussion Paper 988. https://hdl.handle.net/10568/154364 |
| spellingShingle | agricultural marketing prices futures trading Hernandez, Manuel A. Torero, Máximo Examining the dynamic relationship between spot and future prices of agricultural commodities |
| title | Examining the dynamic relationship between spot and future prices of agricultural commodities |
| title_full | Examining the dynamic relationship between spot and future prices of agricultural commodities |
| title_fullStr | Examining the dynamic relationship between spot and future prices of agricultural commodities |
| title_full_unstemmed | Examining the dynamic relationship between spot and future prices of agricultural commodities |
| title_short | Examining the dynamic relationship between spot and future prices of agricultural commodities |
| title_sort | examining the dynamic relationship between spot and future prices of agricultural commodities |
| topic | agricultural marketing prices futures trading |
| url | https://hdl.handle.net/10568/154364 |
| work_keys_str_mv | AT hernandezmanuela examiningthedynamicrelationshipbetweenspotandfuturepricesofagriculturalcommodities AT toreromaximo examiningthedynamicrelationshipbetweenspotandfuturepricesofagriculturalcommodities |